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It depends. There are certain assets and investments that are excluded from paying estate taxes, but the general rule of thumb is that assets and investments located in the U.S. territory upon the death of the owner, even if the deceased is a foreign citizen, are subject to taxation.

Among the assets that are exempt from inheritance tax are the following:

  • Life insurance
  • Bank deposits
  • Portfolio and stock interests
  • Works of art
  • Shares in equity funds

I would like to dig deeper into this issue on another occasion, but I want to stress the following because I know that many readers are wondering why the aforementioned U.S. Treasury certificates, bonds, notes, etc. which their investment advisors have assured them that they are not subject to estate taxes and are not listed above.

The reason for this is that the law specifically levies estate taxes on the obligations or debts of individuals, legal or private or public US citizens. Meaning that the debt includes certificates, bonds, securities, etc., issued by the US government. However, although this has not been discussed yet, this debt is excluded when it involves portfolio or stock exchange interests. But, whenever any of these requirements are not met, the debt will cease to be exempted and will be subject to US estate taxes. What are the requirements? There are several, but among them are that the debt needs to be registered and no more than 10% of the debt is owed, etc.

Finally, if any asset or investment is not listed in the aforementioned list, it will be subject to estate taxes even if the owner is a non-resident foreigner.